Wes Hayden, CEO of Genesys (on the Acquisition of VoiceGenie)

Judith Markowitz: Congratulations on the acquisition of VoiceGenie. Why did Genesys want to acquire VoiceGenie?
Wes Hayden: As with many acquisitions, the original idea came from both companies, so I'll talk about the value of the acquisition for each company.

This is a merger of the two companies with the biggest market shares in the VoiceXML market: Genesys is number one and VoiceGenie is number two. In fact, we both just closed our Q1 by recording more than 70% growth year over year. That shows you the success we are both enjoying; it also shows that adoption of speech is accelerating.

We both wanted to enhance our leadership positions in what we see as a large, growing market, and we both recognized that the next stage for each of us required being significantly larger.

From the Genesys perspective, we had a choice to continue to grow organically - as we had been doing - or grow by acquisition. We knew that acquisition would accelerate our product roadmap. Our parent company, Alcatel, has been supportive of our business and of our plans to fuel our growth and success through acquisitions.

From VoiceGenie's perspective, they knew that even though they have great technology they have been held back somewhat by their small size. This has limited their market reach. They've had great success in North America but they found it challenging to replicate that success in other geographic markets as quickly as they would have liked. Secondly, the size of some of their deployments and the critical nature of the applications led some of their customers to ask whether a small company could continue to support them. Genesys is a much larger organization with worldwide coverage and we are also part of Alcatel.

Finally, if you take a broader view of the speech industry you see that from the customer viewpoint it is very fragmented. This acquisition gives the market a clear leader.

JM: What kinds of things is Genesys getting from this acquisition?
WH: What is key for us is that we are acquiring people and customers, as well as technology. All of these are important to us. With the VoiceGenie acquisition we will grow to almost 150 engineers working on the platform, which is the largest group in the industry. This means that by combining forces we get a larger pool of resources to use to handle market opportunities.

VoiceGenie was also attractive to us because there is not much overlap between the companies. Genesys has focused on providing an environment for call centers. VoiceGenie has been addressing the service provider market which is a segment of growing importance to both Genesys and Alcatel. We also think that VoiceGenie has done a good job with early entry into the enterprise-speech market.

One area in which we do overlap is that both companies share the philosophy of open-standards software. This means it will be easier to merge technologies.

If you put all these things together you get a great fit.

By the way, we are very excited about Microsoft's announcement they are supporting VoiceXML. We think that at this stage of the market clear support for the dominant standard will definitely continue to fuel the growth that we are currently enjoying.

JM: How long has the acquisition discussion been going on?
WH: We started the discussions at the end of last year.

JM: How will this acquisition change the competitive landscape?
WH: Previously, customers had to decide if VoiceXML was the right direction for them. Even though that was usually an easy decision, they still had to evaluate alternatives like SALT and the older, proprietary technologies. Once the decision was made to move in the VXML direction, they still had to spend a fair amount of effort deciding which of the two leading platforms (GVP or VoiceGenie) was better for their needs. As a single company, our combined market share of VoiceXML deployments is two-and-a-half times that of our next largest competitor. We will be the very clear leader in the standards-based software arena. We also expect this merger to accelerate the change away from older legacy IVR technology.

JM: Who do you see as the main competitors for your new, combined company?
WH: I would start with the IVR companies. There are still hundreds of thousands of IVR ports on old machines that need to be replaced. Many still have proprietary technology and the incumbent vendors have an obvious interest in maintaining that base. So, from a competitive point of view, we will remain focused on the big players in the IVR market.

JM: Tell me about your consolidation plan.
WH: We have a number of principles that guide us and we look at it from a number of perspectives: customers and partners, people, and technology.

Customers and partners come first. To some extent, our plan for Voice Genie's customers and partners mirrors the highly-successful approach we used when we purchased IBM's Callpath product in 2001. We made a commitment to continue to support their customers on their existing platform for at least four years. We also laid out a roadmap that would allow them to migrate to the Genesys platform if they wanted to take advantage of the additional capabilities we offered. At the same time, IBM's partners continued to perform the role they played with IBM. Many of them also took on the additional Genesys products. In fact, Viecore, one of the partners we "acquired" in the Callpath acquisition, has become the first Genesys partner to achieve GOLD status in our new partner-certification program.

You can see the parallel with the VoiceGenie acquisition. When we announced the VoiceGenie acquisition we said we intend to support both platforms for a minimum of four years. For example, we released Genesys 7.2 after announcing the acquisition and there will be one additional release of that product line. There will also be two more releases of the VoiceGenie product. After that we'll begin releases of the merged system.

Coincidentally, we have two user conferences in May: the GenieSummit and the Genesys G-Force event. Well use both conferences to discuss our plans and explain what the acquisition means for customers and partners of both companies. We want to address specifics that customers and partners might want to share with us at that time. Also, at GenieSummit we're going to ask VoiceGenie customers to participate in G-Force and to be introduced to the family.

Now I want to talk about the people. In this deal, it was very important to us to maintain the intellectual capital that was part of VoiceGenie. We want to make certain that VoiceGenie employees feel they are part of the Genesys team from day one and not just part of a company that's being acquired. We want to build the team, blend the talents, and create the converged platform together. We're being very careful to bring the team together as equals -- and to provide enough time for the team to coalesce.

On the technology side, we'll move quickly to converge the products. On the one hand, we recognize that the commitment of both companies to VoiceXML is going to make the transition to the new combined technology much easier. On the other hand, we want to give the team time to make the right decisions about how to properly converge the platforms. Right now, we are targeting a mid'07 release of the new platform. We are, however, willing to take longer to deliver the new product if it means we can add things to the platform that will bring additional benefit to customers.

JM: What will the merged system be like?
WH: During the acquisition phase, we used the code name "Aladdin." At first, I thought that name was too obvious. That is, until a few weeks before the merger when some senior managers who had not yet been briefed asked me what Aladdin was.

There's a trend within the service-provider environment towards a single, unified-platform approach. That is, to have one platform that offers the complete range of services. This is a strong trend in the carrier space that we are starting to see for enterprise customers as well.

Aladdin embodies that trend for speech services. It'll contain a superset of the features of both products. In particular, it'll include all features related to TTS, ASR, and speech engines. More than that, what we think is critical from a customer standpoint is the ability to offer a standards-based, universal platform.

Another critical factor is standards. We think that from a customer standpoint the ability to offer a standards-based, universal platform is critical. The combination of the two companies is extremely powerful with regard to our support of open standards for speech. In fact, from a competitive standpoint we see this as setting the bar in terms of open standards support.

The integrated product will redefine the market. It's no longer about just having a VoiceXML box. It's about having a platform that not only supports VoiceXML but that also has the tools and environment for a "multi-tenant" approach across the enterprise with the resilience, scalability, and other things that come with that. This is radically different from the traditional IVR space.

JM: What is your timetable for this?
WH: We plan to release Aladdin 1.0 by mid-2007 and we have scheduled the next version, version 1.1, for early 2008. The reason for the short release cycle is to give customers a chance to test and provide feedback on version 1.0. We plan to incorporate that feedback into version 1.1. We'll continue to build on the system and plan another major release in the first half of 2009.

JM: What is the plan for customers move to the new merged platform?
WH: First of all, we're not going to force customers to migrate. We're going to take great pains to allow customers to change at their own pace. Version 1.0 is designed for our "early adopters"—customers who want to evaluate the latest and greatest. Our intention is to start shipping version 1.1 at the beginning of '08. Existing customers can start migrating at 1.1 or whenever it makes sense for them.

JM: So you are allowing customers to migrate at the speed and in the directions that suit them.
WH: Absolutely. Our success has been fueled by a number of principles. When it comes to product, one of those principles is to allow our customers to migrate at their own pace. Another principle is backwards compatibility. With the rest of the Genesys suite we have been modularizing the products and making them backward compatible. That dramatically eases our customers' effort when they move to new releases.

JM: Congratulations again on the acquisition.
WH: Thank you.

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